Senate bill targets tax-exempt status of pro golf

Congress is considering a bill that would strip the tax-exempt status of sports leagues, potentially affecting how the PGA Tour and LPGA do business.

However, the likelihood of the Pro Sports Act (Senate Bill 1524), which would exclude professional sports leagues for qualifying as tax-exempt entities under 501(c)(6) of the tax code, seems remote. The bill’s focus is the NFL; it would have no bearing on pro sports leagues that don’t seek exemption under this code.

When U.S. Sen. Tom Coburn (R-Okla.) introduced the bill late last month, he did so with no co-sponsors. After a perfunctory reading of the bill, the legislation resides in the Finance Committee, where it likely will stay until the 113th Congress ends in early 2015.

In a written statement from Coburn’s office, the senator contends the bill would close a tax loophole that is worth approximately $10 million a year to the major pro sports leagues and $109 million over a decade.

“Working Americans are paying artificially high rates in order to subsidize special breaks for sports leagues,” Coburn said in a statement introducing the bill. “This is hardly fair. This bill would require major professional sports leagues to be prohibited from qualifying as nonprofit organizations under the tax code.”

The PGA Tour’s response: “The PGA Tour directs all net revenue either to benefit our members or charity.” The statement noted that Tour players are compensated through tournament purses and performance-based retirement plans. “While our tax-exempt status does not require or depend on charitable activities in any way, giving back is a fundamental part of what we do.”

Though the Tour donates millions to charity each year, that part of the Tour’s mission has nothing to do with determining tax-exempt status.

“There’s no correlation at all,” said Bruce Hopkins, an attorney and tax expert in Kansas City. “If this legislation were to be enacted, the organizations involved such as the PGA Tour would become a taxable nonprofit. And then the charitable giving that it does would be deductible as a deduction against a gross income in computing tax, computing the organization’s tax.”

Major League Baseball converted from a tax-exempt status to a limited-liability corporation in 2008 and called the move tax-neutral.

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